At the same time that cottage industry began to infringe on the livelihoods of urban artisans, new Enlightenment ideals called into question the very existence of the guild system. Eighteenth-century critics derided guilds as outmoded and exclusionary institutions that obstructed technical innovation and progress. One of the best-known critics of government regulation of trade and industry was Adam Smith (1723–1790), a leading figure of the Scottish Enlightenment (see "The International Enlightenment" in Chapter 16). Smith criticized guilds for their stifling and outmoded restrictions, a critique he extended to all state monopolies and privileged companies. Far preferable was free competition, which would best protect consumers from price gouging and give all citizens a fair and equal right to do what they did best. Smith advocated a more highly developed “division of labor,” which entailed separating craft production into individual tasks to increase workers’ speed and efficiency.

In keeping with his deep-seated fear of political oppression and with the “system of natural liberty” that he championed, Smith argued that government should limit itself to “only three duties”: it should provide a defense against foreign invasion, maintain civil order with courts and police protection, and sponsor certain indispensable public works and institutions that could never adequately profit private investors. He believed that the pursuit of self-interest in a competitive market would be sufficient to improve the living conditions of citizens, a view that quickly emerged as the classic argument for economic liberalism.

Many educated people in France, including government officials, shared Smith’s ideas. In 1776, the reform-minded economics minister Anne-Robert-Jacques Turgot issued a law abolishing all French guilds. Vociferous protests against this measure led to Turgot’s disgrace shortly afterward, but the legislators of the French Revolution (see Chapter 19) were of the same liberal mind-set and disbanded the guilds again in 1791. Other European countries followed suit more slowly, with guilds surviving in central Europe and Italy into the second half of the nineteenth century.

Many artisans welcomed the economic liberalization espoused by Smith, but some continued to uphold the ideals of the guilds. In the late eighteenth and early nineteenth centuries, skilled artisans across Europe espoused the values of hand craftsmanship and limited competition in contrast to the proletarianization and loss of skills they endured in mechanized production. Recent scholarship has also challenged some of the criticism of the guilds, emphasizing the flexibility and adaptability of the guild system and the role it played in fostering confidence in quality standards. Nevertheless, by the middle of the nineteenth century, economic deregulation was championed by most European governments and elites.